No, Wolfgang Münchau, even now it is not inevitable the UK will leave the EU. And if it does it will not rejoin.

I know it is Wolfgang Münchau’s job to be some sort of agent provocateur in the FT, and today he is true to form – arguing that it is now inevitable that the UK leaves the European Union, and that people who argued for Remain ought to now plan for how to get the UK to rejoin. About the only thing in the piece I do agree with is that a focus on economic issues will not win the day for Remain people. The rest of the piece does not stack up.

Firstly as I see it, and argued last week in my piece about why I am calm about Article 50, is that it has been clear for a few months that Article 50 would be triggered. The trigger itself is an important milestone, but that is about it. To see where things currently stand as the first step along a linear path that will ultimately lead the UK to a Brexit agreement by 29th March 2019 strikes me as wholly false. No-one can fully predict how the next two years will play out.

The UK leaving by spring 2019 may be what happens. That may indeed even be the most likely scenario. But is is far from the only scenario. We are less than a week after the notification and there is already an almighty stink about Gibraltar, and actual negotiations have not yet even started.

Indeed when those negotiations actually start the UK is going to send a negotiation team led by David Davis into battle against one led by Michel Barnier. Davis will be backed by a motley collection of civil servants in a newly formed department, where the expertise of Ivan Rogers has been dispensed with. Look at how Davis behaved at the Commons Brexit committee and do you think the EU is going to take this man seriously? The government’s plan – in as far as it has one – is couched in the vague language of its Brexit White Paper. Meanwhile on the EU side Barnier – a calm, impeccably mannered and canny operator – is better prepared and better resourced than the UK side is, and the Article 50 process stacks the cards in the EU’s favour. “Mrs May’s government may not have been prepared for Brexit in the months after the referendum. But they are now,” says Münchau. Perhaps he is privy to different information than I am, but that most definitely is not my impression.

Now May’s government might have been successful at setting the agenda within the UK – and indeed public opinion on the Brexit question has not shifted. But that has been while the UK has essentially been talking to itself about Brexit, not actually testing its ideas against the wall of reality of the remaining 27 Member States of the European Union. That process starts now. Plus May has had the advantage that she faces a decimated opposition at home, with the Liberal Democrats inadequately strong to land a blow on her and Labour not looking like it is even trying.

As I see it there are two ways forward in the Brexit negotiations – either towards a crunch, or towards a fudge. And both have risks associated with them, both for the UK and, to a lesser extent, the EU. An acrimonious breakdown of negotiations would surely have economic consequences for the UK and – even though I agree with Münchau that economic arguments won’t win the British population around, the government will nevertheless have to cope with the real consequences of economic turbulence (impact on public services for example). Fudge carries its own dangers too – if it looks like May is trying to pilot the UK towards a softer Brexit, or one that has longer transition periods, she makes a problem for herself among her own ministers (would Fox or even Davis tolerate that?)

At the moment what the UK thinks it wants (in as far as that is clear) and what it can get from the EU, and when, are miles apart. How that chasm is or is not bridged is going to be the ultimate test.

Which leads me to Münchau’s final point. He argues that, having left, the campaign ought to be built to get the UK to rejoin. That strikes me as not even worth trying. If the UK manages to find a way to exit without causing itself major damage in the process then the incentive to re-join is going to be minimal. Plus the UK self image, of the great country that can manage anything, would be strengthened, the belligerence amplified. Trying to make a case for the EU in those circumstances would be next to impossible.

So yes, I acknowledge that economic arguments will not win the day, and that at the moment May looks like the master of all that is before her in the UK. But there will be some pretty major bumps and junctions in the road between now and 2019, and when the UK hits rather than negotiating those, the case for a further referendum on the end deal may indeed grow. But of course I cannot with any more certainty be sure that the UK will somehow stay than Münchau can be certain that the UK will leave, but leaving and then re-joining is a ridiculously long shot and should not be any pro-EU person’s plan.

I can see why you say leaving and rejoining is a long shot. I suspect though that leaving will involve significant economic damage. The estimates for the reduction in UK/EU trade all seem to be larger than the recorded reduction in trade among the former Soviet republics when the USSR broke up, and in that case the reduction in trade combined with a number of other factors to produce very significant economic dislocation. And even there, the successor states didn’t try for a hard exit (except for the Baltics) but for a soft unwinding with the formation of the CIS and retention (initially) of trade links and a common currency. There were many other factors at play that caused the economic depression in the former USSR which are not factors in Brexit, but the UK is actually far more trade dependent than those communist territories ever were if I am not mistaken.

Now I say that to suggest that even though there will likely be major damage (just take a look at Ungphakorn’s latest blog entry concerning WTO commitments on services to see what a potential nightmare of complexity awaits), I still don’t think the UK will rejoin the EU. Why? Well I don’t see Brexit being stopped…the other member states might wish to attach conditions to any revocation of the Article 50 notification (and while the UK might be free to change it’s mind, I suspect at this point in the process, the revocation of the notification has to be mutually agreed otherwise it would defeat the intent of Article 50 entirely). Doing so would only be prudent. After Cameron’s torturous renegotiation, the referendum campaign, the referendum shock and all the time and effort that will go into Brexit, the 27 remaining states would be crazy to just pretend nothing ever happened and let the UK resume membership without stipulations. At the very least they might wish to extract a commitment from the UK that it will no longer ask for ever more opt-outs and that it would stop attempting to block the attempts of other states to pursue further integration. They might even try to get the UK to commit to phasing out at least some of it’s current opt-outs.

So if Brexit isn’t stopped, then the UK could potentially rejoin. But I still don’t see it. Because after the UK exits, any attempt by the UK to rejoin will almost certainly not be on the terms that the UK had when it left. It might not be required to join Schengen (as Ireland would still remain outside of Schengen), but I can’t see the UK getting back the Rebate or the opt-out from Economic and Monetary Union. Plus the EU without the UK is likely to be able to push for deeper integration that is even more federal in nature and which will be unattractive to the UK even after any major economic hit.

And an economic hit won’t lead to a permanent depression. Just like most of the former Soviet republics there may be a downturn but it will be followed by a recovery. The UK won’t be as rich as it could have been had it remained in the EU, but an economic recovery will likely dampen desires to rejoin the EU in order to reverse the economic damage.

Instead, much as how the former Soviet states have never reformed a federal state but instead have put in place integration structures that are less than federal, then so I might expect the UK and EU to eventual re-integrate but not go as far as the UK rejoining.

That might be the EFTA/EEA option…or it might be an option which it seems nobody has yet properly examined – An Association Agreement (AA) with a Deep and Comprehensive Free Trade Agreement (DCFTA) PLUS a Customs Union Agreement and a security agreement (like what Andorra, Norway and Switzerland have with the EU and forming a de facto common customs security area which provides exemptions from the requirements to lodge pre-departure declarations (including EXS)). Andrew Duff has done a good job of looking at the Ukraine model (which is just an AA with a DCFTA), but he hasn’t looked at the possibility of the AA also including a customs union agreement and a customs security agreement. Given how the DCFTA compares to the EEA (see Sieglinde Gstöhl’s book “The European Neighbourhood Policy in a Comparative Perspective”), tacking on a customs union agreement and customs security agreement might be the closest possible relationship short of EU membership or EEA membership. It would essentially be the Ukraine (DCFTA)/San Marino (Customs Union)/Andorra (customs security agreement) model.

In fact I suspect if Cameron had examined the issue thoroughly before setting out an a renegotiation exercise and looked at the realistic options (EEA, Turkey model, Swiss model, Ukraine model, Ukraine/San Marino/Andoraa model, Canada model, North Korea model, Hic Sunt Dracones model of trading only under WTO commitments) then he might either have campaigned harder and with more heart for the EU or he might have gone to his European partners and asked for the EEA model or Ukraine/San Marino/Andorra model from the get-go instead of renegotiation and offered the later two models as a way to keep the UK happy and keep it from holding other EU states back from integrating.

Creative Commons

Reuse the content of this blog

All written work on this blog is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. If you are a commercial organisation I may still be willing to syndicate written content to you, but please contact me first. Photos are usually not taken by me and are separately licensed - Creative Commons licensing information for these can be found in the sidebar of individual blog entries.